Victory for Microsoft In Court

In a ruling that constitutes a legal coup for Microsoft, the U.S. Court of Appeals reversed a previous ruling that called for Microsoft to be split into two companies.Online Extra: It's the morning after (give or take a day) the big decision. But what does it really all mean and where do we go from here? Editor in Chief Michael J. Miller weighs in.

In a ruling Thursday morning that constitutes a legal coup for Microsoft, the U.S. Court of Appeals for the D.C. Circuit reversed a previous ruling that called for Microsoft to be split into two companies. A ruling in the case had been expected for weeks and sends the case back to a lower court and a new judge for reevaluation.

U.S. District Court Judge Thomas Penfield Jackson's previous ruling would have created two separate companiesone responsible for operating systems and another for applications. In addition, Judge Jackson called for a number of restrictions on Microsoft's business practices, which he called anti-competitive. His ruling, which he based on his finding that Microsoft has operated as an illegal monopoly, came at the tail end of the Department of Justice's multi-year antitrust investigation of the company. As part of the most recent ruling, the appeals court has removed Jackson from further proceedings, criticizing him for the "appearance of partiality" for making offensive comments about Microsoft in public.

The court also reversed Judge Jackson's ruling that Microsoft's bundling of its Web browser and operating system violated antitrust law. The company's next version of the Windows operating systemWindows XPis slated to ship in October. Windows XP bundles several applications in a similar way that Internet Explorer is bundled in previous versions of Windows.

Microsoft President and CEO Steve Ballmer and Microsoft Chairman Bill Gates have been vocal in recent months about their conviction that the company would not be split up. In anticipation of Thursday's ruling, speculation had swirled about the Supreme Court becoming involved next. "Unless the Court of Appeals rules entirely in favor of Microsoft, and throws everything out, the Supreme Court will likely dodge the case at this time," Donald Falk recently predicted. Falk is a partner with Mayer, Brown, and Platt in Palo Alto and an antitrust specialist.